One Big Beautiful Bill Act – Major Tax Changes in the U.S.

Please see below for a summary of the major tax provisions included in the newly enacted “One Big Beautiful Bill Act” (H.R. 1), signed into law by US President Trump on July 4th. This legislation introduces significant changes to both business and individual tax rules. 

Corporate & Business Tax Provisions International Provisions

Global Intangible Low-Taxed Income (GILTI) 
Key Highlights:

• Removal of net deemed tangible income return by eliminating the ten percent deduction of qualified business asset investment less specified interest expense component.  This change applied to taxable years beginning after December 31, 2025.
• Permanently increased the GILTI deduction from 37.5% to 40% for taxable years beginning after December 31, 2025.
• Allowable deemed paid foreign tax credit attributable to net CFC tested income is increased from 80% to 90% for taxable years beginning after December 31, 2025.

Foreign Derived Intangible Income (FDII) now will be referred to as Foreign Derived Intangible Eligible Income (FDDEI)
Key Highlights:

• Removal of the intangible component by eliminating the ten percent deduction of qualified business asset threshold.  Therefore, more corporate taxpayers may find themselves able to benefit from such deduction.  This change applied to taxable years beginning after December 31, 2025.
• Permanently increased the FDDEI deduction from 21.875% to 33.34% for taxable years beginning after December 31, 2025.
• Additional exclusions to deduction eligible income (DEI).

Base Erosion and Anti-Abuse Tax (BEAT)
Permanently rate decrease to 10.5% from the scheduled 12.5% rate for taxable years beginning after December 31, 2025.

Foreign Tax Credit (FTC)
Changes to the FTC limitations in connection to US produced inventory sold via foreign sale branches.

Controlled Foreign Corporation Look-Thru Rule 
Permanent extension the applicability of the look-thru rule which provides an exception to Subpart F for certain dividends, interest, rent and royalties received from related CFCs.     

Removal of One Month Deferral Exception for CFC Tax Years
Removal of one month deferral exception which allowed CFCs to have a taxable year that ends one month earlier than the US majority shareholder.

Removal of Proposed Section 899
An agreement was reached between the Department of Treasury and other G7 nations for a proposed “side by side” solution therefore the so-called “revenge tax” provisions thereunder have been removed from the OBBBA.

Corporate & Business Tax Provisions Domestic Provisions

Permanent 100% Bonus Depreciation
Businesses can now permanently deduct the full cost of qualifying property in the year it is placed in service. This restores a key incentive from the 2017 TCJA and applies to property acquired and placed in service after January 19, 2025.

Increase in Section 179 Expensing
Businesses can now immediately expense $2,500,000 for qualified property under Section 179 for property placed in service during the taxable year with the phase-out threshold increased to $4,000,000.  

Immediate Expensing for U.S. Research & Development (Section 174A)
Domestic research and experimental (R&E) expenditures are now immediately deductible. Taxpayers may also elect to amortize these costs over 60 months or 10 years.
The bill also provides two forms of retroactive relief for previously capitalized R&E costs incurred after December 31, 2021, and before January 1, 2025: 

• Small business taxpayers (under $31 million of average annual gross receipts for the 2025 tax year) may apply the new expensing rules retroactively to those prior years.  This would require filing amended returns to deduct the amounts capitalized.
• All taxpayers, regardless of size, may elect to deduct those previously capitalized costs over a one- or two-year period, beginning with their first tax year starting after December 31, 2024.

Expanded Depreciation for Manufacturing Property (Section 168(n))
A new provision allows 100% bonus depreciation for qualified production property used in U.S.-based manufacturing. The property must meet specific criteria, including being newly acquired and placed in service between January 19, 2025, and January 1, 2029. Depreciation recapture will be taxed at ordinary income rates.

Interest Deductibility Enhancements (Section 163(j))
The current calculation of "adjusted taxable income" under 163(j) uses EBIT. The OBBBA shifts this calculation to EBITDA, which effectively allows for larger deductions for business interest expense because it includes deductions for depreciation, amortization. The change to EBITDA is not permanent, however. It's specified to apply to taxable years beginning after December 31, 2024, and before January 1, 2030.

Expands Section 1202 qualified small business stock benefits
There are five key provisions summarized below:

• Reduction of Holding Period the holding period for qualified small business tock is reduced from five years to three years and introduces a tired benefit structure.
• Increase in Gain Exclusion Cap increased cap from $10,000,000 to $15,000,000 for stock acquired after the applicable date.
• Increase in Gross Asset Test Thresholds the ceiling for a corporation’s aggregated gross assets to qualify as a “qualified small business stock” is raised from $50,000,000 to $75,000,000.  
• Recognition of Foreign Research Expenditures active business requirement is broadened to include foreign research and experimental expenditures.  

Individual Tax Provisions

Standard Deduction Increases
Beginning in 2026, the standard deduction will increase to $15,750 for single filers and $31,500 for married couples filing jointly. These amounts will be indexed for inflation in future years.

Pass-Through Deduction (Section 199A)
The 20% deduction is made permanent. The phase-in thresholds are expanded to $75,000 (single) and $150,000 (joint), and a new $400 minimum deduction is introduced for taxpayers with at least $1,000 of qualified business income.

SALT Cap Relief
The state and local tax deduction cap is temporarily raised to $40,000 ($20,000 for married filing separately) for tax years 2025–2029.

New Deductions

• Up to $25,000 for qualified tip income (2025–2028).
• Up to $12,500 for overtime compensation ($25,000 for joint filers) (2025–2028).
• Up to $10,000 for interest on qualified passenger vehicle loans (2025–2028).

Estate & Gift Tax
The increased exemption amounts are now permanent, providing long-term certainty for estate planning. For 2026, the exemption is $15,000,000.